America, The Startup: How European Settlers Launched The Most Entrepreneurial Economy In The World

Building a new industry is even harder. Especially when it's on the other side of the world.

For nearly a century, exploration of the Americas had been carried out under royal patronage. Whatever spoils were brought back belonged to the crown.

That began to change toward the end of the 16th century, when a group of profit-seekers became convinced of the promise of untold riches waiting to be discovered in what came to be called the new world. They were called "adventurers." The term referred not only to those willing to risk their personal safety by setting sail for America, but to those willing to finance such undertakings, investing in fledgling colonies designed to exploit the vast resources available overseas. Today, we would call them venture capitalists.

The European settlement of North America, then, was accomplished by a series of start-ups.

But as with any wave of firms entering a radically new sector, it took some flameouts and consolidation for what might be called America Inc. to really get off the ground.

Sir Walter Raleigh, explorer and smoker, was a favorite of Queen Elizabeth but was later beheaded for his supposed involvement in a conspiracy against King James.
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As in many new industries, the pioneering players weren't the ones who we necessarily remember today. The first two English adventurers to try to make it in America were Sir Walter Raleigh and his half-brother Sir Humphrey Gilbert. Raleigh is now recalled more for his infamous personal and political life — he was a favorite of Queen Elizabeth, became England's first chain smoker, and was eventually beheaded.

Nor did Gilbert even really care much about America itself. In 1576, a document called "A Discourse of a Discouerie for a New Passage to Cataia" built up evidence that the continent contained a northwest passage to China. The work found its way up to Queen Elizabeth, on whom it made a large impression. In an early example of what we might now call a "request for proposal" or RFP, she put out the word that she was entertaining pitches for expeditions. Two years later, Gilbert applied for and received a license to establish a colony in America.

Storms forced back Gilbert's initial attempt to reach the Americas, and it would take another five years before he took another shot at it. His crew eventually made it to Newfoundland in August of 1583, though no attempt was made to form a colony. But against the advice of his crew, Gilbert took a smaller ship home back to England, and was lost at sea.

Undeterred, Raleigh lobbied for and received a 1584 charter from Queen Elizabeth to settle the territory England claimed in America, basically the entire East Coast north of modern-day Florida. He was given license to exploit whatever economic opportunities he could find there, and reading the charter one can detect early echoes of the precise, legalistic language often encountered in modern contacts. Raleigh had the go-ahead to "discover, search, find out, and view such remote heathen and barbarous Lands, Countries, and territories … to have, hold, occupy, and enjoy commodities, jurisdictions, royalties, privileges, franchises, and preheminences, thereto or thereabouts."

Virginea Pars map, including Roanoke Island, drawn by John White during his initial visit in 1585.
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Raleigh himself never made the journey, but an exploratory expedition sent back strong initial reports: "fish the best of the world…fruites very excellent good…and soile…the most plentiful, sweete and fruitful and wholesome of all the world." So in 1585, Raleigh, who had by now gotten himself elected to parliament and knighted by Queen Elizabeth, self-funded an expedition to set up a beachhead settlement on Roanoake Island, on the Outer Banks of what is now North Carolina.

Despite those glowing early reports, the reality encountered by the settlers on arriving proved more challenging. The local Algonquin tribe was hostile to the newcomers, supplies were inadequate, and the colonists neaerly starved. When Sir Francis Drake, the greatest seaman of his generation, made a surprise call at Roanoake, all the settlers there left with him.

Raleigh, meanwhile, was diversifying. He had begun to shift his focus toward developing holdings in Ireland, which he'd helped occupy. And in April of 1587, he was appointed Royal Captain of the Guard, responsible for Queen Elizabeth's personal safety. Still, he wasn't quite ready to give up on a North American settlement, outfitting one final expedition there.

NEXT: Once a Pirate, Always a Pirate

A water color by artist/explorer John White.
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Once a Pirate, Always a Pirate

On May 8, 1587, about 100 colonists led by an artist named John White set sail for Chesapeake Bay. But at some point the Azorean-born pirate Simon Fernandes, who'd been paid to pilot one of the boats, convinced the expedition to sail to Roanoake to check up on a group of soldiers who'd been dispatched to support the settlers, before anyone had learned of the Drake rescue. They arrived on July 22 but found no trace of them — they'd likely all been slaughtered. Fernandes then informed the settlers that they would not be allowed back on one of the boats. Making a quick pivot, he planned to use the vessel instead to attack and loot Spanish ships. The entire mission was now grounded at Roanoake. While White, who was nominally in charge, may have been expected to put up a fight, he later wrote that it "suited [him] not" to contend with Fernandes.

The decision would prove fateful.

The Queen had been issued on private ships leaving the British Isles as the French and Spanish navies kept badgering the them. Raleigh did manage to launch a two-ship relief mission to the colony, but it was forced back by a French fleet. It would be two more years before another crew was dispatched. When they arrived in August of 1590, they found the entire colony abandoned.

There are a number of theories to what became of the so-called "Lost Colony" at Roanoake, ranging from infectious disease to slaughter by Algonquins. A more recent theory suggests the colonists may have split up and assimilated into local tribes.

John White finds 'Croatoan' scratched on a tree, the leading to the mystery of Roanoake's Lost Colony.
Wikipedia

In any event, Raleigh ended up taking a £40,000 loss — $14 million in 2012 dollars — on the enterprise, according to historian Percival Griffiths, and it would be more than a decade before an Englishman would invest in the American colonial project again. A royal Privy Council at one point considered sponsoring its own expeditions, but the motion did not prevail.

Still, even in "beta," America's potential could not be ignored. In 1589, an account of Virginia written by a man named Thomas Hariot and featuring illustrations by White, the artist and settler, appeared in a travel compendium called "The Principall Navigations, Voiages and Discoveries of the English Nation." Hariot described a place where "the ayre [is] so temperate and holsome, the soyle so fertile and yeelding such commodities." Today, business plans generally include risk disclosures. Hariot and White didn't dwell on the negatives. Instead they focused on the upsides.

The Earl of Southampton, thought to be the "fair youth" of Shakespeare's sonnets.
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Readers responded: The book went through 17 editions between 1590 and 1620. With that kind of promotion, it seemed certain, someone would eventually figure out how to make the America venture thrive.

The next to try was the Earl of Southampton, a wealthy nobleman best known as the patron and possible muse of William Shakespeare. In 1602, he paid for an expedition to tap into American natural resources and establish a trading post in the mid-Atlantic region. A coterie 20 colonists and a dozen crew, departed in March, arriving at Cape Cod in May. They built up a small fort, but by the end of that summer they'd lost enthusiasm for the project: they feared the Algonquins, and were worried about running out of supplies. It was agreed that they would sail back.

Next: The Jamestown Settlement

King James, in a portrait by John de Critz, c. 1606. James created the Council of Virginia, a sort of board of directors, to oversee the Jamestown settlement.
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The Jamestown Settlement

By this time, it was clear that a successful colonial enterprise would require more funding than a single individual could provide.

So in 1606, two groups of investors, one from London, the other from Plymouth and other parts of western England, petitioned King James for charters. The King obliged, granting rights to establish two separate colonies with a clear purpose: to "dig, mine, and search for all Manner of Mines of Gold, Silver, and Copper." The crown would take a cut of 20% of the first two minerals and 15% of the latter, but the holdings themselves would be private. The London group was granted the rights to all territories stretching from South Carolina to New York. The Plymouth group got everything north of that. Neither would be permitted to establish a settlement within 100 miles of the other. Both were given mining rights and the license to print their own money, as well as take whatever measures were necessary to guarantee their own defense, and anyone trading with the colonies — the overseas operation — had to pay duties to the company back in England.

On May 14, 1607, 104 men and boys outfitted by the London group landed at the mouth of the Chesapeake Bay, naming their settlement Jamestown, in honor of the king.

Meanwhile, the King had established the Council of Virginia — essentially a board of directors — to oversee the operation. After two years, the London group applied for a new patent, granted a year later, that officially incorporated the company, now called "the Treasurer and Company of Adventurers and Planters of the City of London for the First Colony in Virginia." While the King retained final say over its affairs, the Company itself could now elect a new council, which in turn could make laws for the colony and appoint a governor (or president) for the colony, not unlike a board electing its CEO.

The company also went public. Shares were priced at £12.10 — $3,665 in 2012 dollars. To be sure, it was an amount only the privileged could afford. If you bought £50 worth, you could sit on the council. If you were a settler, you got one share, as well as the right to a proportional share of land.

Next order of business: drafting a prospectus. To goose demand for stock, the company initiated an intensive marketing push. In those days, that meant pamphlets. Usually written in a breathless first-person prose, these accounts generally described how an investment in the Virginia project would bring massive returns, not to mention helping to boost England's standing in the world.

One such testimonial read in part: "with-holding no longer, I yeeleded my money and endeavours as others did, to advance the same, and now upon more advised consideration, I must needes say I never accompted my poore means employed to better purpose."

Another satisfied customer.

Initially, at least, such pitches struck a chord, and by June 1609, the company had raised enough money — one estimate says the float reached £10,000, or $1.58 million in 2012 dollars — to send 500 more colonists to Virginia.

But things went south quickly: So many new arrivals were struck down with "sicknesse" or famine that only about 60 survived to 1610. Worse, a key member of the original expedition, Captain John Smith, had returned to England to recuperate after his powderbag mysteriously exploded in his boat during a sally down the James River, severely burning his legs.

Virginia Historical Society

Smith had actually been arrested on the initial voyage to Jamestown in 1607 for insubordination, but he had proven himself an able leader of the colony during the next two years, having established excellent relations with the local Algonquin tribe after its chief's daughter, Pocahontas, rescued him from a scrape. Still, his fellow settlers continued to loathe him — his self-promoted exploits included having beheaded three Turkish officers while fighting on the side of the Habsburg Empire, then subsequently getting sold into slavery by the Ottomans — and some historians believe he may have been the victim of sabotage.

Without Smith, the Algonquins became less eager to share their turf (they were not shareholders in the new enterprise, after all), and began sabotaging the colonists, by, for instance, cutting down their corn.

A replacement governor was named, but his voyage from England sailed off-course to Bermuda. The resulting lack of oversight proved increasingly problematic: It seems the individuals who were actually settling the colonies were a bunch of degenerates.

When Lord De La Warr (for whom the state of Delaware is named) finally arrived to take up his post as Governor, he sent back word that recruitment efforts should become more selective, and the Council dutifully established that only "honest sufficient Artificers, as Carpenters, Smiths, Coopers, Fishermen, Brickmen, … shall be entertained into this Voyage."

In 1611 De La Warr's health detriorated, and the company contemplated shutting down.
Lord De La Warr, appointed governor-for-life of Virginia, died at sea on the way from England to check on the colony.
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By that point, cash flow had slowed, and shareholders were losing confidence, defaulting on their subscriptions.

Fortunately, another bullish report offered hope for improved prospects, and the company apportioned another £30,000 for two years, and then went on to raise an additional £18,000, in part through lotteries, a common revenue generator in the 17th century. In March 1611, three more ships, carrying 300 settlers, set sail for Jamestown.

This time, the company was able to sustain some momentum. It tapped a new revenue stream by figuring out how to grow tobacco, and initiated a new push to win over the locals, especially Powhatan, Pocahontas' father.

The settlements were basically run as communes. The planters were organized into different classes according to skill level, and were required to devote a month's worth of work a year to the colony's upkeep. Each also had to contribute dues of 12.5 bushels of grain into the "magazine" — the common store — each year.

In another promotional pamphlet published around 1616, the company heralded Virginia's "great plentie and increase of Corne, Cattell, Goates, Swine, and such other provisions, necessary for the life and sustenance of man." It worked: By 1616, the colony had grown into six different settlements. Demand for American products was up, and people wanted to work there.

In 1619, Virginia's first government was set up: 22 "burgesses," or assemblymen, now representing approximately 900 settlers spread over 11 different districts. The advent of this body, ultimate control over which the company still maintained, was the last major push to make the Virginia enterprise more attractive to potential settlers. (It is officially the longest-running representative assembly in the "New World.") Among its first measures: punishing a third charge of public intoxication with "lyeing in boltes" — leg irons— for 12 hours.
Pocahontas saves the life of John Smith, in an 1987 lithograph.
Wikipedia

1619 would prove the last good year for corporate-run Jamestown. By 1624, the "sicknesse" and renewed native hostility, compounded by the death of Powhatan in 1622, had cut the overall population from 6,000 to no more than 2,000 settlers. Virginia was transformed into a quasi-paramilitary operation to fend off the Indians, and commerce began to wither.

Not surprisingly, a drop in revenues led to dissension. Council members — the board — began trading accusations of mismanagement. Eventually, a petition was submitted to the King to settle the dispute, and in 1623 a formal inquiry began. On April 13, 1623, he handed down a 39-count indictment alleging a litany of management missteps.

The company and the House of Burgesses vigorously contested the accusations, which the King responded to by putting some company officials under house arrest. The suit dragged on for another year, and in May 1624 the monarch decided he'd seen enough, revoking the company's charter and assuming control of Virginia. By 1621, the shares had become largely worthless.

NEXT: The rise of Plymouth

The Rise of Plymouth

The Signing of the Mayflower Compact, by Edward Percy Moran (c. 1900).
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Attempts to settle the area granted to the Plymouth group — the second, northern, half of the original 1607 American charter — had basically gone nowhere after a settlement near present-day Bath, Maine, fell victim to factionalism and famine, forcing the survivors home to England.

In the meantime, John Smith was back in business as an explorer, heralding the great fortunes to be made in northern America. In 1616 he published "A Description of New England", giving the territory an attractive new brand identity (one he originally coined two years before) we still employ today — one of the most successful marketing coups in American history.

Four years later — around the time when things in Jamestown seemed to be getting back on track — another attempt was made to settle New England. The initiative came from a single man, a nobleman named Ferdinando Gorges, who'd been part of the original Plymouth group and had basically sat on the rights for all those years.

On November 3, 1620, the King granted a charter for a 40-member council that would run a plantation there. The company failed almost immediately, however: A group of investors who'd promised to bankroll the venture to the tune of £100,000 backed out at the last minute.

John Smith's account of the place he called 'New England.'
Wikimedia Commons

The Council's appointed Governor, Robert Gorges, Ferdinando's son, proved feckless. Unable to support an actual expedition of its own, the council ended up simply doling out acreage to anyone who asked.

We recall one such group every November.

For more than a decade, a cadre of Christian radicals who rejected all religious authority had been camping out in the Netherlands, and were now concentrated in the town of Leiden. They'd been hacking it there as best they could, but the group's unity was beginning to crumble as younger members seemed increasingly to lack the fervor of their parents. Eventually the prospect of a second emigration was raised. In part thanks to Sir Raleigh, who'd gone there in the 1590s to explore whether El Dorado — the City of Gold — really existed. But the group rejected the idea on the grounds that it was too hot, and too Spanish (and therefore too Catholic).

Eventually they decided on an area north of Jamestown. To make the move, three issues had to be addressed: They needed permission to settle there, they needed someone to pay for the trip, and they needed to be sure they wouldn't get hassled — they'd still technically be subjects of England, after all.

To win the King's blessing, they were required explain their views on Church and State. This would require real nuance — indeed, the result would have been the envy of any modern corporate PR shop. They duly submitted what's now called The Seven Articles, which Griffiths describes as "a masterpiece of evasion," appearing to acknowledge the Crown's authority over religious matters, "if the thing commanded be not against God's word." That was some pretty cagey spin, but apparently it was enough to satisfy King James — who perhaps was simply happy to not have them back in England — and the separatists were given implicit permission to settle in Virginia. They also received a patent from the London Company to settle on its territory.

As for funding, the Dutch had approached the separatists with a promise of sponsorship. But despite their opposition to the Crown, Griffiths says, the Pilgrims were mindful of the poor optics involved in taking money from a foreign nation, and so turned down the offer. In early 1620, a man named Thomas Weston visited Leiden representing a group of adventurers. He drove a hard bargain, offering the Pilgrims a seven-year contract stipulating that all proceeds from trading would be returned to the syndicate, and all property held in common stock. After seven years, assets would be divided pro rata among adventurers and planters.

The result was a joint-stock company, with share prices set at £10. The funding round included about 70 investors, with a total float worth £1,500, or $265,000 in 2012 dollars. Weston apparently lacked the heft of the original London Company investors.

Separately, the adventurers had also signed up a group of English emigrants, and in July of 1620, the Pilgrims, in a boat called the Speedwell, went to go pick them up, setting sail with them from Southampton in another boat called the Mayflower. But the Speedwell kept leaking, and after two attempts to set sail as a flotilla, everyone was forced onto the Mayflower.

Henry A. Bacon's painting, 'The Landing of the Pilgrims' (1877).
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Finally, on September 6, 1620, the Mayflower left Southampton. En route, they were blown northward to Cape Cod.They decided to stay there, but realized they would need to get a separate license from Gorges to do so. As a temporary measure, they signed the Mayflower Compact, just to cover their bases. The Compact would also come to serve as a kind of statement of principles for their goal of founding a new community.

Weston ended up selling out of his stake early, perhaps sensing that the Pilgrims, as William Bradford called the settlers in his account of Plymouth colony, Of Plymouth Plantation, lacked the business sense necessary to sustain a going concern. (For their part, the Pilgrims regarded their angel investor as utterly corrupt.) The remaining investors were forced to change the terms of the contract, relaxing the communal land stipulation and granting each family its own private parcel for cultivation, on the hope that greater autonomy would produce higher yields.

But revenue growth was nil. So in November of 1626, a group of Pilgrims known as "the Undertakers" hatched a plan to buy out the Adventurers' stake and take control. They settled on a price of £1,800 — about $278,000 in 2012 dollars — in installments of £200 a year. The debt wasn't paid off until 1642, and Griffiths estimates the original investors only got about 33 cents on the dollar.

In 1630, the Pilgrims received another patent from the Council of New England in the name of Bradford. They technically remained subservient to the Plymouth Company, but five years later the company folded, leaving the Pilgrims free subjects, albeit carrying a large debt load and still under the authority of the Crown.

Despite their perseverance and moral character — we recommend Governor William Bradford's account, an astonishingly humorous, intelligent read— the Pilgrims never numbered more than several hundred and eschewed most all forms of financial enterprise. As a result, they weren't especially effective at doing much more than establishing a safe haven free from religious interference.

Massachusetts Men

The job of turning North America into a going business concern would fall to the Massachusetts Bay Company, established in 1627 by a group of wealthy investors known as Puritans. The investors were led by Matthew Craddock, who would go on to become the first governor of the company. He is described by UCLA historian Robert Brenner as "one of the greatest traders of the period." (Unfortunately no image of him exists.)

While also known for their unconventional spiritual beliefs, the Puritans' views were not quite as radical as the austere Pilgrims'. Still, a crackdown on all non-mainstream religious groups in England created an urgent need to leave the country.

But they still had to raise the funds to do so. So on Feb. 27, 1629, in a bid to attract additional investment, the adventurers obtained a charter to form "the Governor and Company of the Massachusetts Bay in New England." Shares costing £50 — $8,080 — were floated, and 110 men subscribed. Each got 200 acres of land, plus 50 additional acres for every servant or labourer he successfully recruited to settle the colony (shareholders did not go themselves).

Puritan minister Cotton Mather, a leading force behind the Salem Witch Trials, in a portrait by Peter Pelham.
Wikimedia Commons
Some early investors got cold feet, defaulting on their share installment payments. But getting out of England remained of critical importance. A large voyage scheduled to leave on March 1, 1630, found itself £3,000 short of funds with only a few months to go, so some of the most fervent (and wealthiest) core investors agreed to double their stake. But it still wasn't enough.

So following the Pilgrims' lead, a group of Undertakers was formed to buy out all remaining shareholders under a new plan. The company would move its headquarters to Massachusetts itself, where it would be run for seven years, after which time the principal would come due to the remaining shareholders. They ultimately ended up getting about 33 cents on the dollar. But demand to emigrate was substantial: Over a thousand immigrants arrived in New England during the second half of 1630.

They were right to leave: In 1634, King Charles created a new body known as the Lords Commissioners Of Trade And Plantations and appointed an Anglican bishop, William Laud, to lead it. The agency was given virtually unlimited authority over England's colonies, public or private, and Laud filed a suit against the Massachusetts company in July 1636 to take control of the colony. The Massachusetts settlers resolved to fight any takeover by force — an attitude that would last another 150 years.

The colony got a brief reprieve as Charles became distracted with foreign affairs, and Massachusetts was left to its own devices for some time. But in 1684, the company's charter was revoked, and the crown took over.

Still, the combination the wealth of the company's backers and a sustained wave of settlers fleeing intolerance allowed the Massachusetts Bay Company's to grow into England's first successful large-scale American colony.

Today's startup founders are fond of talking up their commitment to changing the world. The Puritans did exactly that — though it helped that they had no choice.

As you can probably tell by now, it's hard to pinpoint who the heroes were in this story. The most visionary investors — the founders of the London company — weren't the most successful. The most successful settlers, the Pilgrims, were terrible with money. Matthew Craddock never actually visited America, and there is very little named after him in Massachusetts, or anywhere else for that matter, though his tolerant religious views and liberal-minded politics would come to be reflected in modern America.

The Massachusetts Bay Company was certainly the most prosperous of the there English companies. But it was not early America's most successful one. That distinction belonged to the Dutch West India Company, a nationalized corporation that between 1624 and 1664 set up a thriving trading hub at the mouth of the Hudson. They called it New Amsterdam...